By Fiona Rutherford
CVS Health Corp. will cut 5,000 positions from its workforce to help reduce costs as the drugstore chain focuses on broadening from its retail roots into more health-care offerings.
None of the job losses will impact customer-facing positions in stores, pharmacies, clinics or customer services centers, a spokesman for the Woonsocket, Rhode Island-based company said Tuesday. The decision is part of an initiative to reprioritize investments around care delivery and technology and reduce expenses, the spokesperson said.
CVS’s move deeper into patient care includes the recent acquisitions of home health-care provider Signify Health and primary-care company Oak Street Health. Last quarter CVS cut its annual earnings forecast, citing costs for the purchases. And in May, CVS announced that it would phase out its clinical trial unit with a complete exit by the end of next year. A spokesperson at the time said the business “no longer aligned with our long-term strategic priorities,” although the company was among the first retail chains to move into the space back in 2021.
The job cuts may signal that CVS is feeling pressure to reach its long-term earnings targets, Bloomberg Intelligence analyst Jonathan Palmer said. CVS’s organic strategies are likely playing out slower than expected, Palmer said, and the company is looking at all avenues to drive profit growth. Assuming each job cut saves $100,000, the reduction could add 25 to 30 cents in earnings per share, he said.
The shares were little changed when markets opened in New York at 9:30 a.m.
Rival Walgreens Boots Alliance Inc. has also been cutting jobs amid a similar move to diversify away from drugstore operations. Walgreens said in May that it planned to cut 10% of its corporate workforce, or 504 employees, to focus on its primary care strategy. A spokesperson said that the job cuts about streamlining the business rather than financial concerns.
The Wall Street Journal first reported the CVS job cuts Monday, citing a staff memo.
First Published: Aug 01 2023 | 9:45 PM IST